When I ask people what they expect from their investments, their first answer is ‘profits’. So I now have to be more accurate in my questioning…
One of the questions is ‘What returns do you expect on a realistic basis from your investments?’
Obviously in nsc and ppf they know the answer…but when it comes to equity, the answers are amazingly WRONG…
Very few people ‘expect’ to get returns in the range of say 15%. Most people have expectations in the region of 20% to 40%.
Also the answer varies from time to time. Let us say in 2014 you have just seen the last 5 years SENSEX returns as follows: 80%, 10%, -10%, 7%, and 18%. …..
What should your expectation for the year ending March 2015 be?
The correct answer is : I DO NOT KNOW. Repeat, I DO NOT KNOW.
We tend to think that if we take an average over the past 5 years, we cannot be wrong. That is also not true at all. The gender of the person does not matter at all – women are as greedy as men, age does not matter – maybe older people need to earn it faster…not sure!
On an annualized basis the market is ALREADY UP by 11% from its 31st March figure. Assume it does NOTHING from now till the 31st March, EVEN then it has ALREADY given you returns far in excess of good quality debt instruments. Assuming it goes to 30,000 it means it would be up by about 30%+.
We just DO NOT KNOW WHAT will happen. However, in the next 5 years one of the years we will see ONE year of 80% or thereabouts. To get that you will have to be around and make sure that you stay during the whole journey, and not get excited and sell of half way through!!
Please have ‘reasonable expectations’ – the Japanese economy grew at 10% for 10 years, then at 5% for 10 years..and then at 2% for….
In the Indian context we have seen a great double digit growth over the past few years…however any expectation by the investor which is in excess of 13-14% p.a. for the next 10years is foolishness.
Of course if the ‘adviser’ tells you that it is possible to get more than 20% p.a., it is not just wrong, but almost a fraud! but hey he could be right too, occasionally!
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